Rate rape

A year ago he accused bankers of fueling a debt orgy with a race to the bottom. That warning from F was enough to cut short the 2.99 Special, offing a mortgage war the cowboys at BMO started. But that was then. This is now. Don’t expect the elfin deity to be throwing out any warnings this time. In fact, he wants it.

BeeMo tried to stir a few moist loins last week by dropping the rate for a five-year fixed home loan by a dime to just below the magical 3% mark. When this happened last spring the bank scored big media coverage, at a time when real estate was skidding into its orgiastic climax phase. Bidding wars were everywhere in Toronto. Asking prices were mere suggestions. Sales in March literally exploded. Sellers were gods. Realtors were rock stars. And this blog, ignored as always, warned about the Vancouverization of 416.

Growled a pissed F to the bankers: “You should be cautious about your lending practices, because this is the type of practice that led to a mortgage crisis in the United States several years ago. So my expectation is that you will not compete to the bottom on interest rates, which is the direction they were going.”

My, oh, my. What a difference a year makes.

Yes, BMO has brought back the 2.99 Special. But Scotia and others have been offering it for weeks already. In fact, if you have a good downpayment, or show a little leg, you can get a five-year, locked-in rate for just 2.95%. A seven-year term can be yours for 3.59%, and you can even lock in for an entire decade at 3.69%.

In fact, bankers are getting downright aggressive, understandable since the real estate market this February is a pale shadow of that a year ago in places like Toronto, Van, Montreal, Edmonton and Halifax. How about this email, sent out to realtors last Thursday by a lady named Nicole, whose title is “Home Financing Advisor, Home Financing Solutions” at Scotiabank:

“Did you know that I can offer a re-finance for your client’s who may be facing a matrimonial break up to 95% of the property value to “buy out” a spouse from their matrimonial home…Helping your clients in this fashion is bound to build good will….and be good for your business.

“Did you know I can show you….and your customer’s who may have some equity or cash to invest…..a way to generate an annual rate of return in the 40% range….yes….I said 40!! AND not only that…..we can generate YOU some commission in the process!!! YOU NEED TO SEE THIS PRESENTATION…..and I am happy to sit down with you and show you…and once you see it…..you will want your past client’s to see it also…..email/call me today to set up a meeting.”

Doesn’t this sound more like a Tom Vu commercial, or a Brad Lamb seminar, than an offering from the nation’s second-biggest bank? Is there a whiff of desperation in the air, or is that my hockey bag again?

Banks are scrambling to rekindle the property virgin hormones, now that housing sales have eroded after F kicked the slats out from under the market. Killing off the 30-year home loan had every ounce of the impact I thought it would, shutting out at least a fifth of potential newbie buyers. Meanwhile punting mortgage insurance on listings above $1 million has doused this increasingly critical segment of the market, since buyers now have to come up with a third of the price in cash (including closing costs).

In places like North Toronto and most of Vancouver, it’s serious. Of the 70,000 SFHs in Van, for example, 54% are assessed at more than a million – a number which grew by 50% between 2009 and 2012. This is one more reason sales in VanCity, the Lower Mainland and Victoria are crashing.

The fear in Ottawa, as you know, is whether F & the peckerettes went too far in creaming the market. Given that inflation is now less than 1% and the economy had negative growth at the end of 2012, won’t a weakening housing market just exacerbate the situation? You bet. Of course it will. But a new plunge into more household debt has worse long-term implications.

Given all this, the smart money will stay on the sidelines. Houses will cost less in the future, and mortgages will shrink. If rates rise a little, families will still be better off waiting.

A harder decision is whether people with existing or new mortgages should opt for a radical borrowing – ten years at 3.69%. That means paying a premium of seven-tenths of a point for a long five years, gambling that for the next five you’ll score.

thanks garth for the comments. we are entering into a renewal and were asking exactly that, do we lock in for 5 yrs (@ 2.99%) or go for longer. with more than 10 yrs left you really think we should lock in for 10 yrs with these type of rates? could you point us towards a graph showing the rates from the past? thanks

“Did you know I can show you….and your customer’s who may have some equity or cash to invest…..a way to generate an annual rate of return in the 40% range….yes….I said 40!! AND not only that…..we can generate YOU some commission in the process!!! YOU NEED TO SEE THIS PRESENTATION…..and I am happy to sit down with you and show you…and once you see it…..you will want your past client’s to see it also…..email/call me today to set up a meeting.”
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2.99 from bmo…. whatever… talk to a mortgage broker, they will get you 2.89

and variable rates are coming in lower too…. prime less .50….. 2.5%

and cashback 100% financing is still available,
so there is still money waiting to be lent out

however a good number of first time buyers are absolutely tapped out after a downpayment and their borrowing ratios are pretty much maxed…

i think this feeling i get is just like the feeling that Wil E Coyote gets when he realizes that in his pursuit of the roadrunner he has been in midair for a half a second and he does not want to look beneath his feet. This is because he is way up in the air and the solid ground is a long long way down.

Tuesday biopsie for the little lady, my wife just to Damn perfect. They don’t make Em any better. If it’s bad news, I’m done no more short term rentals. Got to be there for her, promised to not stray for 12 months after the dead, I will keep the promise.

Kijiji Edmonton is starting to have more and more listings for condos in BC. It’s kind of a pathetic stretch to think someone searching Edmonton listings is going to impulse buy a condo in another province?

“You can find a house now (in Toronto) for $400,000 – $500,000 now. That is the big trend – people wanting to cash out of their condos,” says Flanagan. “They are having kids, growing up. They want to buy homes, with space – with a yard.”

Moving out of their condos — selling to who?

A harder decision is whether people with existing or new mortgages should opt for a radical borrowing – ten years at 3.69%. That means paying a premium of seven-tenths of a point for a long five years, gambling that for the next five you’ll score.

Pffft. Canada will see a 1.99% mortgage within the next two years. The BoC is mopping up every bond dumped on the market to keep yields heading lower.

Members of our Sober, Second Thought of House will continue to justify their expenses and change the rules to suit their personal agendas. Snouts very deep in the trough these days. Long live the taxpayer! We Senators come FUUUUURRRSSSSTTT……………

So, 2.99% for 5 years, or 3.69% for ten. It’s actually pretty workable, but with prices teetering, this is the sucker’s bet. What I want to know is what the banks will be offering in two years time, when I am ready to make a move. Will the coming decline keep them hungry, and keep mortgage rates low for premium, low risk clients, or will the banks chuck in their hands at residential mortgages, and find another sector of the economy to pillage?

Always be cautious about cheap money as it might be a trap, and reminds me about meeting a gal in a hotel who chats me up at the bar, and says sweetie lets take a seat together, as like you a lot. Then she shows me too much leg, so have it all; and says $1000. So much for ex Real Estate sales women who are out of work.

What F did 5 years ago was a politically astute (short term) – if economically disastrous (in the long term) – move: instead of having the government go further into debt (like the US did with the stimulus program), F made housing more affordable.

Coupled with the minimal interest rates charged by the Bank of Canada, these two measures had the following consequences:

1. Canada postponed the market crash (already under way at the time of the rules change) and rekindled the RE market, to the point where the market kept going up, up and up some more. Now we hold the (dubious) title of “most overrated RE market in the world” (according to the best magazine in the world – the Economist).

2. Canadians started using their houses as ATMS (HELOCs), and used the money they thus got for the good things in life: vacations, stainless steel appliances, big screen TVs, boobs/nose jobs and new cars. This further stimulated the economy, starting a “Virtuous cycle” that reduced unemployment and bolstered the GDP.

Which then triggered:

3. The conservatives gained a majority in Canada… and proceeded to implement their agenda: new fighter jets, more prisons to tackle unreported crime, 1 billion on organizing the G20, etc., etc., etc..

4. The average Canadian household is now deeper into debt than at any time in recent memory.

5. Middle-aged people postponed investing in saving for retirement (in part because they wanted to help their kids get on the RE gravy train).

6. Carney became almost overnight a banking demigod, and earned the spurs that led him to become the first non-Brit Governor of the Bank of England (I think he is likely competent, but I also believe that he happened to be in the right place at the right time).

We will face the consequences in the next few years…

I am sick of liberals being kicked out of Government (after they placed the country on a solid path to prosperity) by conservatives who then destroy this legacy with their stupid wars on the middle class… This happened both here and in the US (don’t forget we are 3 to 5 years behind).

The only good news is that the liberals will be there to do the heavy lifting once we will wake up, bankrupt and with a big hangover when the party it’s over.

It will be a very interesting year comming up for Alberta. Due to pipeline choke points and Alberta dilbit differentials many big heavy oil / tar sand projects are going to be pushed into the future. This means engineering companies in Calgary will be cutting employees (already hapening at IMV, Worley and AMEC). When projects are cut back then the field construction eventually cuts back 6 – 12 mths. Watch out below !!!

I just looked up Brad J. Lamb up online, and yes, Garth was there too! HAHA!!
I think he looks creepy. If I were at work and he were staring at me I’d freak out and wonder if I would ever see my family again.

As for the interest rates, they may be low, but you still need one heck of a downpayment to buy anything. You may be getting free money, but a $500k house will still cost you a $100k downpayment! Yikes!

#36 TurnerNation on 03.03.13 at 8:43 pm
“*whispers* I think metals will bounce very soon, which will only help the TSX out.”
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Don’t whisper too loud. Gold will be testing $1,500.00 this week.

A number of you have commented on the banks. The feeling i get from the comments is that the banks stocks are going to come crashing down.

Seems like analysts were looking for a decline in profit recently but that did not happen, the banks are making their money from other areas.

It was stated on here that CIBC is most at risk, that seems to make sense considering the majority of their business is in Canada.

TD on the other hand has some nice diversification in the US.

Going to be interesting to see where the banks play out this year, they are off to a positive start.

Anyone see 60 mins tonight regarding residential real estate in China, what i saw tonight even scared the you know what out of me. China have built cities after cities with buildings and Malls that are completely empty, not even Canada is that bad.

Rates are 100 percent certain to be lower in then years’ time. America can only keep on trying to con the rest of the world with their lies. As TLT heads back up and approaches the 140 U.S. level as the rest of the market collapses that will be confirmation of the obvious.

I wonder if any of those bikini girls ever took one of Tom Vu’s seminars so they could write their own ticket instead of doing the bimbo thing for union scale on board his crappy little runabout.
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BTW, it was a stellar weather day in Vancouver. It gave me a chance to get out and rearrange the deck chairs. See y’all on the bottom.

Our mortgage is up mid April. I was going to go one or two years! What if we ever wanted to sell and rent? Right now we have prime minus .75 and the bank is offering us just prime this time around. Now that I’ve read this, I’m not sure what to do – still have a little time to decide!!

“Of course, CHMC is the 800-pound gorilla (actually, a 600-billion-dollar monkey) of the mortgage insurance business, underwriting the lion’s share of high-ratio, high-risk mortgages on houses bought by people who have no money. Because CMHC stands behind lenders like BMO or CIBC, it takes away their risk in the case of default. That means banks have no reason not to give money to people they’d otherwise laugh out of the branch.”

Canadian Banksters must be going through some serious withdrawal symptoms from the crack cocaine of ten years of easy money. Having just received their annual booklet of Banking Fee ‘changes’ (they never have the balls to print the word ‘increases’ in the booklet) from the Canadian Imperial Bank of Criminals, whom I dumped a long time ago, it’s interesting how these fee ‘changes’ relate to the Canadian annual inflation rate.

#57 Karie — “Right now we have prime minus .75 and the bank is offering us just prime this time around.”

What are you offering the bank? Are you offering to move all your business elsewhere (assuming you have significant business besides your mortgage) so they don’t have to worry about it? Are you offering them the chance to match better rates that you can find posted on the internet? If you don’t like what they’re offering, offer a mortgage broker the chance to work for you.

If the bond market was to determine the real interest rates as to correspond to the current high inflation (yes it is not 1-2 but rather 6-8 percents) and CHMC did not exist house prices would have been 35-40 percents of the current sky-high valuations.

Surpressing real interest rates comes at the expense of the savers and retirees (bye bye pension plans) and the taxpayer that takes the risk and would ultimately subsudise the fallout of CHMC

So in the years to come:
1. Don’t come even neare government or municipal bonds
2. Don’t be a saver, invest instead
3. prepare for being screwed with taxes, so try legally to minimize your tax exposure

The fact that the central banks and governments enforce this crime (in fact this is stealing from savers and pensioners) thru the manipulation of interest rates and by imposing risks on ta payers and tryes to hide the fact of the foreclosure numbers mounting is a very serious warning of what is to come.

Tom Vu used to be one of the staples of late night cable television along with Peter Popoff Ministries preaching the Prosperity Gospel and Joe Francis’ Girls Gone Wild DVD series with the nubile college sirens on spring break.
Aggressive interest rates will not work at this point in keeping the bubble alive.

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“. . . he accused bankers of fueling a debt orgy with a race to the bottom.” — Surely one could not expect that shriveled piece of ravioli to stand up in the HoC, point a finger at himself and say, “I was responsible for the present debt orgy!” That’s just not cricket, is it?!

I made the right choice in switching to curried chicken pie as well as homemade shepherd’s pie. At least I know what I’m eating!
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#8 AK — “Unbelievable. I think it’s time to sell the Canadian Bank Stocks.”, #41 Snowbush — “The feeling i get from the comments is that the banks stocks are going to come crashing down.” and “Is there a whiff of desperation in the air, . . .” — Such as this — TPTB know something us up Otherwise they wouldn’t be running off and hiding like scared cats. Money has a role to play in all of this, and Soros Three guesses as to who (basically) killed Japan’s economy. Hint: He is now bankrolling Obomba, and will end up taking the US the same way as Japan; Pissed Off An excellent retort from a lady teacher to a politico. Right on the money with this; Sequester BS The middle class is losing what they once had, and 6:24 clip Wealth inequality in the US; Economy This horse needs a rider; Payday and Rollover Loans Curbs coming soon; Anonymous Sharing Wall St.’s CEOs, etc. personal stuff with Twitter; Italy Viva la nutballs! gdO’s racket Shut the Vatican Bank. Is it any wonder Pope Benny quit early? Plus Money was the prime reason behind all the others listed here.
*Tiny The planet should be large enough enough to accommodate him; The BBC charges a fee for licenses in the UK, which any person who owns a TV must pay. However, it is not always used for the correct purpose; Unclear on the concept;Butterflies thriving in abandoned LA town; Hospitals There are several ways to depop., reduce SS or CPP payments and this is one; 0:26 clip trutube.tv, alternative to Youtube; 7:55 clip The Manning – Assange Hoax. Sandy Hook, aka Sandy Hoax; Monsanto Why is Bill Gates afraid of answering questions? Illegals bringing multi-drug resistant TB across the border; Square Foot Gardening Pix and info.; FDA, Big Pharma and Monsanto In bed with one another, and 1:22 clip Mass. schools send kids home with letter saying they’re too fat; Chihuahua-sized horses caused by CC. Do you honestly believe this fake propaganda BS? 37 Survival Downloads.

This will affect all cities in China, and of course Richmond too. My friend who is Chinese and has wealthy family and friends in the China told me how his aunt is circumventing the one condo rule by buying multiple condos in her relatives names. She has done this many times over. This will not end well and Canada will suffer immensely, not just our property market buy all of our natural resource sectors as well.

A real up-tick of condo & housing rentals here in Edmonton. Most of the listings are right in Edmonton with a population of 700,000.00 it seems there are a real uptick of listings over 18,000 in the Real Estate Section:
apartments, condos (3598)
house rental (2396)
room rental, roommates (3187) …….
and so one….

Garth – I just wanted to take a moment to thank you for this blog and this very timely post.

I’ve been reading your blog since June, shortly after selling my condo in Mtl. I heard about the new mortgage rules – and being completely oblivious – I had to ask myself why they would do that? I was planning to buy now in the GTA and after some googling, I read all about the “Manhattanization of Toronto”. Umm… yeah. Ok. So I continued my search for someone speaking sense and this is when I found your blog.

This week, I got a cold call from an “investment advisor” at the bank. They saw I had some money (creepy!) and wanted to help. I explained that was my house money but that I was concerned about the housing market and wasn’t planning to buy just yet. Oooh… that got him excited. He asked if he could set me up with the mortgage guy. I said no. He asked when I was planning to buy – and not knowing what to say, I just said “not before September”. He asked if he could set me up with the mortgage guy in September… so I just said “sure” – but asked that no one call me until then.

Well… 2 hours later, I got a call from a “senior” mortgage guy at the bank. He told me:

– Not to listen to the negative media, the market was just fine
– That I needed to get pre-approved because he could get me a rate of 2.99%, which means I could borrow so much more.
– That inventory right now is “very low” so I have to act quick if I want something good
– That he could set me up with a realtor and get me on an email list of new listings (even though I told him I was not ready) – because “you never know what you will find” (Umm… I do know! If I’m not looking, I won’t find…)
– That I’m doing “so much better” than my peers and can totally afford a place (stroke my ego, stroke my ego – besides, I’m sure this is a lie)
– That buying is SO much better than renting AND cheaper! (another lie)
– That my plans to pay off debt and save in the meantime were “honorable” but “not necessary”

What I didn’t have the heart to ask was why – if he’s so busy – did a senior mortgage guy have the time to cold call little ol’ me when I repeatedly told him I wasn’t interested at the moment?

And on another note, when you apply for a car loan, do they ever say “Let me set you up with a car salesman. Here’s some brochures of pretty cars”?

Why is the bank trying to sell me a house?? And so persistantly!

I found the whole thing creepy, a little bit violating and very pushy. From one of the “big 5″.

I am so glad I found your blog, Garth, and decided to do a little investigating/researching before jumping back in. I am convinced more than ever that a correction is in the cards. It’s really scary! My goose would have been cooked!

I fear for the average consumer who doesn’t know better and trusts the bank to look out for their best interests. Clearly that’s not even remotely true if they are qualifying and encouraging people to max out at 2.99%. I don’t see how this can NOT eventually lead to a correction… and a lot of tears.

#63 … are you old enough to remember The Prisoner? The giant bubble used to give me nightmares when I was a kid, but deja vu — now it’s coming for EVERYONE. Twenty minutes since I watched your link to what’s going on in China and I have yet to pick my jaw up off the floor.
ARE THEY INSANE???
Double drat this site … I will not sleep well tonight.

It’s been my experience that really smart people don’t spend any time at all telling others how smart they are. It’s just obvious, like when someone is tall.

As soon as someone announces how smart they are, it’s usually a good sign they’re full of crap. Which are you? Guess only time will tell, but I have a thousand dollars that says smoking man’s net worth is under ten grand. I’m thinking dreadful loser, living in a basement, maybe your parents’? And I bet smoking man is closer to 30 than 50 years old… Ever see a 53 year old type? They spell things correctly for starters.

That whole scene rubs me the wrong way. I say this because I know there are a number of well-meaning people in my life who I’d wager would take the ‘Senior’ mortgage expert at his/her word.

These well-meaning people aren’t stupid – they’re skilled tradespeople, mechanics, computer programmers etc – but they just couldn’t lead themselves to believe that one of Canada’s Big Six, among the finest financial institutions in the world, would lead them astray.

Wouldn’t be ironic if f were to make interest on mortgages tax deductible . To sort of do penance for all those 40 ,35, 30, year ams that he and his flock created . After all he would be long gone before the interest hit the fan .

yes, RE is a real asset, but not as “hard” as Smoking Man would like it to be, especially residential. It is worth only what someone is willing – and able – to pay for it, and the building part invariably deteriorates over time and costs. You can’t write off maintenance and repairs or capital expenses on the RE most people will own, a principal or other personal residence, and now there is no garantee of future capital appreciation to grow or at least recoup their investment.

RE may become hard after however long it takes for the bubble to deflate. Smoking Man of course believes that the banks will keep the bubble going. Not being a genius, that’s not a gamble I would invest in.

Garth, a friend said to me this weekend, at our monthly scotch tasting, that a mutual friend of ours, who bought a place a few months ago, out in Brooklyn, Ont (really? who moves east of Victoria Park? *barf*) and said a real estate agent came knocking on his door asking if he’d be looking to sell his home over the next few months. He couldn’t sell his house now if he wanted to. His house has no equity in it and he has savings because he blew all on closing costs and decorating it. To make matters worse, he commutes into Toronto to work as some low level IT guy. He’s so petrified that if he loses his job, he loses the house and maybe his family.

Since I don’t really about these two “friends”, I said “Tough tatas, sucks to be him, and borgarting while gossiping is not cool.”

To the Smoking man. Why do you go on and on about gibberish garbage? If you are so rich and know so much, why do you continue to keep coming here. All you seek is attention. You say your wife may be ill and in the next breath you keep putting everyone down. Is it your game to see how many people will feel sorry for you and then in a week you will say—Ha Ha sucker!! I use to work with people like you. I don’t anymore. Get it! They are still working. As you call it the machine. I retired at 53. See ya little doggie!

#75 Slightly less foolish – good post. Yes, if you or anyone believe what the NL@TB or anyone at the bank for that matter tells you or think that they do anything in the best interests of their clients, you have another thought coming. It’s all about shareholder value which is why you buy bank stocks. Maybe not right now though.

These people are scrambling to keep their jobs right now just as they were back in 2008 when the housing market was dead in the water and falling. The only thing that saved the housing market was F’s nothing down 40 year mortgage scam and the banks teaser prime minus rates plus the 4.5% drop in interest rates by the summer of 2009 after the GFC.

We are back where we were in 08. All they did was put off the correction and created a massive housing bubble which will explode like the Hindenberg.

Real estate is one of the most dangerous commodities out there right now and anyone getting into it now even at these low interest rates are in for a rude awakening.

“The core philosophy of Lewis F. Powell was that humans were getting in the way of corporate profits. Everywhere he looked in 1971, he saw people rising up on behalf of racial equality and peace and ecology and justice. From the huge population of educated youth, he heard increasingly angry distrust of corporate media and its war propaganda. From “consumer activists” such as Ralph Nader, he heard intense suspicion of the corporate agenda — from the dangerous cars it produced to the poisonous cigarettes it manufactured while lobbying hard against any “health warnings.” (Powell was counsel for the cigarette industry’s lobbying arm, the Tobacco Institute, before he was put on the Supreme Court by Nixon.)

His driving vision is terrifyingly real today, as the default position in the wars against the middle class that is even specifically proclaimed by particularly clumsy operators like Mitt Romney. Powell’s goal was “changing how individuals and society think about the corporation, the government, the law, the culture, and the individual.” His outlined methods of warfare were front organizations and constant propaganda funded by the biggest corporations in the world.

It has been almost completely successful. The biggest corporations no longer pay taxes at all, while the personal income tax rates on the very richest have plunged since Powell’s policies became the platform of the corporate-controlled Republican and Democrat political parties. In 1971, the richest .01% paid a top income tax rate of more than 70%, while the federal rate for the richest 1% was nearly 50%. Today, neither group of the ultra rich pays more than 35% and tax on long-term investment earnings is capped at 15%, while the burden on the squeezed middle class and working class has risen. (Only the poorest — the most likely to revolt — have seen their federal tax burden decline. Of course, they’ve also seen a dramatic reeling in of the social safety net during this same period, and they are walloped with an ever-growing series of use taxes, user fees and sales tax.)”

… RE may become hard after however long it takes for the bubble to deflate….

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Herb, I think you got confused here. RE is always the same asset and just changing hands. The more hands to reach for it => the more it cost. The less hands to reach for it => the less it cost. Bubble is about money, not about hardness.

People often think that they own RE when they have 100% mortgage on it, but it is just banks playing games with people’s minds. So you can’t really touch it hardness if it is not yours, right? But if you ask banks about RE – it is as hard as it can be, it is like slavery of 21 century. I see them laughing…

This week, I got a cold call from an “investment advisor” at the bank…

He asked if he could set me up with the mortgage guy.

He asked when I was planning to buy…

2 hours later, I got a call from a “senior” mortgage guy at the bank…

Why is the bank trying to sell me a house?? And so persistantly!

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You’re asking the wrong question here! You should be asking – yourself – Self, why am I discussing my personal finances, surely one of the most private of topics, with a total stranger, not of my choosing, over the telephone???????

The last time I got one of those calls out of the blue from someone I’ve never met, whose name I don’t recognize I interrupted his (rehearsed) patter with questions of my own.

Questions like: How much do you have in your personal bank account? What, specifically, are your personal funds invested in? When are you planning to move some of your personal money around? Why don’t you open a TFSA or RRSP at the branch of XYZ bank?

And the clincher, how could you possibly think I will discuss such a personal and private matter with a total stranger? He hung up on me.

You are a former politician, you should know better ;-) Doesn’t it make more sense for this government to get this bubble correct asap rather than a wait for full power explosion in 1 or 2 years (close to the 2015 election) ?….

why should the taxpayer subsidize mortgages over a millon with the cmhc…..why should taxpayers subisdize the movie industry or civil service pensions? why not give the multiplier effect argument a kick in the ass and realize that money left in the pockets of the individuals who earn it will also buy clothes furniture and cars etc…the socialist brain beating canadians have endured to persist in agreeing with the subsidy argument is sick.

Is that title supposed to say non-consenting mortgage rates? Because that doesn’t make sense.
And also… so much for ‘rates have nowhere to go but down.’ I’ve been hearing this for years, and yet… rates stay low. It just goes to show that no one can predict the future – there are too many factors, especially over 10-20 year spans.

WOW…TOM VU, i remember my mom and dad fighting about this guy (dad wanted the boat and girls) mom said no way to Tom Vu plans….

fyi, Garth, grey market has been 2.77 for the last 6 months…

In respect to F, he is actually protecting the condo market – no impact to condo buyers as we discussed, 150$ a month on your avg 300k box, while keeping punters out of the housing market where he and his pals traffic…

Let’s talk risk/reward, WB.TO and get paid 7.5% or buy Whistler Real Estate with negative payments??? Figure that one out. The next years will be better in stocks then RE….

Gotta laugh at the 60 Minutes segments on China. The numbers are staggering re the Ghost Cities and they are still building them. Liked the part where they go into a mall that has KFC Starbucks etc signs up, but no working business exists or will ever exist..its all to lure buyers.

Then they interview some gal who is supposedly THE biggest developer. Her story is she grew up poor, worked in sweatshops…went to England, got a Masters joined GOLDMAN SACHS, got married ….this later translates into biggest developer in China???WTF??? Lots of missing links…

“Bank of Montreal is hoping to make a deal with first-time homebuyers, dropping its rates on five-year fixed rate mortgages, even as Finance Minister Jim Flaherty warns Canada’s lenders not to embark on a “race to the bottom” with rates that could reignite a Canadian real estate market that he has worked so hard to cool. The rate cuts at BMO come ahead of the key spring real-estate rush and may prompt other lenders to follow suit, denting the government’s and the Bank of Canada’s efforts to convince Canadians not to take on more debt. Prudence is always the preferred path for Canada’s biggest banks, until profit growth slows, it seems.”

“Speaking of the Bank of Canada, the central bank will announce a decision on interest rates Wednesday. While no one expects the Bank of Canada to adjust its benchmark rate, a growing number of analysts and economists expect central bank’s tone to soften even further from the last statement underscoring speculation that an increase in rates is further away than it was a month ago.”

It wasn’t the first time we’ve seen examples of speculative madness in China but last night’s “60 minutes” program really did lay it out bare.

No longer can we point with pride to Toronto’s measly 175 new condo towers. We should come back to the table when have 300 fully finished surplus cities to brag about.

And when I look at the handful of towers (say 40 or so) rising in Greater Vancouver I feel the true insignificance of my hometown on the world stage. A bit player in an off Broadway production. Way, way off Broadway.

You hear the Chinese saying things like…

“there could be a bubble forming”
“things have become somewhat heated”
“perhaps residential real estate has run its course”

…while pussyfooting around the accurate description:

“the greatest gasbag humanity has ever produced”

At least the Chinese middle class has a semblance of an excuse. They are limited in where they may invest their recently acquired (soon to be vapor) wealth. And being the great practitioners of herd mentality they are, it follows that each member of the family should own an empty condo in Mongolia.

Its a vicious circle for the people. I mean the real estate cartel lies to them to buy. The Gov adjusts the property values according to their formula, therefore the taxes go up. The banks try to sweet the deal up with low mortgages for more borrowing. Do we even see the big picture, we the people/buyers are the ones that are screwed here from: Real estate cartel, Gov, Banks and so on. Oh prices went up, its ok here is more money to borrow so you can pay us as long as you live. Wake up! This is slavery in a new dimension at a new era.

More than $600 Billions have illegally left China. They do not care the high cost of RE in Vancouver as their main objective is to move money away from China. How can the local compete with them? How can the Canadian government allow this to happen. I think we should set up some kind of communication between Canada and China to report these kind of illegal money flow..

Garth has often suggested purchasing US dollars via real estate or ETFs. I wish I had followed his advice more aggressively since our dollar is headed down. In some sense everything in the world is priced in US dollars so yes real estate prices in Canada are headed down. The only uncertainty is whether they are going down in Canadian dollars.

#122 – I agree. The affordability is now based on the rock bottom interest rates. With more than 70% are homeowners, how do you expect another leg up on the housing prices? Interest rates have only one direction to go (which is up) in the future.

@Dan, post #6;
That may actually be a good idea of these non registered investments are largely invested in U.S. equities, where there has been a good run up in values, and investing it in parts of the U.S. (or better yet Spain) where property values have taken a big drop.

#123 R1200C – In China proper beware of the definition ” home ownership ” as it is leasehold rather than freehold with agreements up to 70 years. The State in effect owns all over time which partly explains why Canada home ownership becomes attractive, as they have an asset which can be passed on.

Stop picking on the Chinese, as most of the money coming to Canada has been earned within families that are educated with businesses that have prospered, and they want to purchase Real Estate that is freehold. I met a young girl from China who came here for a university education, and asked her what her daddy did for a living, and he owned a high tech company involving telephones in China, so bought her a property in Ontario while going to university. :)

Interesting event today. One of the RE agents who keeps e-mailing me monthly propaganda on the RE industry, has taken a new approach. Today the e-mail was about how your credit score is determined and how to improve it.

Apprently the new high ratio mortgage rules mean you actually need to pay attention to your credit score, at least more so than in the past. It also occurs to me that he is trying to help re-supply greater fools of the most highly leveraged type, now that there is a growing shortage of them.

The segment on 60 minutes last night did a quick piece on China’s (supposed) houing bubble – or better known as a condo bubble –

Can someone enlighten me – there are cities in China that are virtually empty – each one is bought by citizens with hopes that prices project upward – but they care not to rent them – what gives!! Wouldn’t you think that each month maintenace fees slowly eat away at any possible profit.

Thousands upon thousands of empty units – and exactly who will buy these – they interviewed one fellow and he said “if” the bubble bursts – look out – he should have said “when” not “if”…or did I miss something. Millions of poor rural peasants surely can’t be the answer to their problem.

Whether the Chinese money is legal or not, our government has a responsibility to protect the average citizen from being priced out by non-Canadians looking for investment opportunities. (For example, it’s ridiculous to argue that cheap money is the only force behind Vancouver’s prices.) Or are we the world’s prostitute?

Of course, no actual government cares about the little guy, so I don’t expect to see any protection in this regard.

Now this young girl from Beijing caught my eye as could speak perfect English; was very attractive; and the clothes she was wearing said it all, so asked her out for Dim Sum. She asked me if I was a wolf, and said trust nobody and she laughed, and she said ok. This was an opportunity of a lifetime, as spent all my time asking questions about China while the cart service came about with Dim Sum dishes.

This young woman was overwhelmed that a man in Canada would take the time to learn about her country, as was fishing for detailed information. Last summer she asked me to come to China all expenses paid as could stay with her family for a month, as she wanted to show me around and experience the culture. Well a bit too old for it all, and China scares me too; nope do not want a vacation there.

#138 sciencemonkey — “Whether the Chinese money is legal or not, our government has a responsibility to protect the average citizen from being priced out by non-Canadians looking for investment opportunities.”

An important thing to remember is that the selling boomer (or whoever) gets his golden ticket punched regardless of who buys. You could equally look at it as a giant scheme to suck in offshore money and trap it in soon-to-be depreciating assets while the local sellers keep the boodle and don’t have to worry about retirement.

Weather you love or hate this guy, here is a short video clip of the late George Carlin in a 2005 performance. http://www.youtube.com/watch?v=FeLLR3LWtv4. Warning some profanity. How relevant are his words today?

Unlike the false matrix that the masses believe to be true, this man understood the true nature of the world we live in.

It’s hard to believe that in the year 2013 the masses are still clueless as to how they are being manipulated and herded through planned economic crisises, wars and media by a group of elite global central bankers, corporations and stock market con men working behind the scenes!

You can thank the corporate controlled MSM, governments and education system for the complete dumbing down of society! The ability for people to be free critical thinkers with independant thoughts has been replaced by spoonfed coporate controlled MSN (mainstream news) and government sanctioned official news reports! Anyone questioning these official accounts are quickly marginalized as conspiracy theorists, tinfoil hatters, crackpots or anti establishment!

It quite astonishing to see how brainwashed and gullible the masses continue to be! People continue to believe this global economic turmoil and talks of wars in the Middle East and around the world just happen by mistake or by chance. Think again! Nothing happens by chance in the political, financial or military realms!

If you really want to gain a better understanding of how you are being manipulated and controlled you must read “Propaganda” by Edward Bernays and “Age of Propaganda: The Everyday Use and Abuse of Persuasion” by Anthony Pratkanis & Elliot Aronson.

I will leave you with this quote from Propaganda:
“If we understand the mechanism and motives of the group mind, is it not possible to control and regiment the masses according to our will without them knowing it.”- Edward Bernays

But “because of the effects of inflation and price momentum, it is not expected that prices would drop by this amount,” it added. “If growth halted and prices began to drop, it would be expected to take several years for home prices to revert to their sustainable values, depending on a number of factors such as government support and credit availability. With this timeframe, the actual observed decline in prices could be as low as 10 per cent.”

In other words, a 10-20% correction with differences in regions, followed by a slow long melt as incomes and rents catch up and we revert to the mean.

I posted a while back that around the time of NAFTA….many firms were already looking to move jobs overseas to places like China. The long and short of it is the Western Countries are purposely being hollowed out.

Now, If China has a one child policy, that is far below the replacement rate. (I also find it interesting that here in Canada. many Chinese families have only one child).

IMHO, China is simply being set up as a proxy, to replace the US. China is “under control”..and its not by the Red Chinese..oh they will go the way of Russia and shed Communism ? The victors of the Opium War never left China, Mao was simply another proxy to set China up for later.

There are articles that Russian Communism was “yanked” by the US in an economic coup de tat, which is basically the running modus operandi through history . However, the US is going down the road TO Communism..wipe out the middle class and then equality via 99% at the bottom.

One has to understand the Potemkin Village effect…kneejerk look of prosperity with big visuals…they may as well be holograms the public is so brainwashed.

China is being set up to be a huge carpetbagger…I’ll post some info later. The rug will get pulled out elsewhere FIRST…and China will add to the infiltration it has already achieved in our midst.

…”Janice S., a 64-year-old woman in Connecticut, was rushed to the hospital in what turned out to be heartburn. She was charged $995 for the ambulance ride, $3,000 for the doctors, and $17,000 for the hospital – $21,000 for a three-hour precautionary checkup.

Part of the hospital bill was a special stress test, employing radioactive dye and a CT scan, which cost $7,997.54, about six times more than the hospital’s regular stress test. Medicare would have paid the hospital $554 for the special test.

For many of the lab tests, Janice was charged about ten to fifteen times more than the Congress-supervised Medicare rate. The hospital’s own filings to the Department of Health and Human Services showed that lab tests in 2010 brought in $293 million from patients, while costing the hospital just $28 million.

When confronted with the details, a hospital spokesperson said, “Those are not our real rates..It’s a list we use internally in certain cases, but most people never pay those prices.”..read more

“Can someone enlighten me – there are cities in China that are virtually empty – each one is bought by citizens with hopes that prices project upward – but they care not to rent them – what gives!!”
———————–

You fail to understand the Chinese mindset. Once you rent out your condo, even for a month, you have tainted it. You are now stuck with ‘used merchandise’.

No one would buy it while other unspoiled identical units are still for sale. These units are purely for speculation.

So my question is, if all this Chinese cash is entering the Vancouver economy, what will happen when it’s time to take the money out? If nobody buys, will these “investors” lose their investments? Or have they already cashed out at 80% via HELOCs from the local banks? Tell me, how does that figure into CMHC’s stress tests?

#139 Dreaming – am an expert in annuity contracts and do not even have to look at your link, as the cost of money is too low for a pension scenerio. Now there is one contract that is important which involves a huge capital gain for the sale of a business that must be executed within 90 days or check the latest. It is called an annuity term certain, whereby, the tax liability can be spread out over a number of years to hoop the Tax Man :)

All these discussions about China and their investments abroad just want to make me puke up my shui jiao-style dumplings and stir-fried green vegetables. What we have to remember here is what we are dealing with as populaces strictly controlled by their government. These billions could disappear in smoke if the government decides to do so. I would never count on Chinese investment for anything. I can also tell you from experience that if they can not buy it they will just outright copy it. With the amount of money they are pouring out of the country these investors could literally purchase some tin-pot dictatorship country and run it from abroad. Oh Crap that’s us!!! My bad!

The US market is huge when compare to Canadian market. The impact of these money on the Canadian RE is much noticable in a small market like Canada then in the US. Furthermore, the US immigration program is much tigher than the Canada (i.e. more money needed to qualify as investment immigrant and the money to purchase their house in the US does not count toward as their investment in the US – I believe the US required that their investment must be directly link to certain amount of employment)

#139 DreamingInTechnicolour — “Some advice in the article about a life annuity”

As long as everyone is perfectly clear as to what a life annuity is. You pay money in exchange for a monthly income as long as you live, rather like the opposite of life insurance. When buddy in the article said the annuity at 9% was the equivalent of an investment that paid 9% after tax, the elided point was that it’s only equivalent as long as you’re ambivalent about a $100,000 difference in the value of your estate. With 4 kids, the client in the example might not be. I’ve nothing against annuities, as long as everyone understands exactly what they are. Their prices work just like bonds’ do with regard to interest rates.

Nothing is being seized. It is merely a small tax levied on those too stupid to simply declare the money they are bringing in. Canada does not report money brought in to other countries governments, and certainly not to China, and we don’t care how much you bring in.

This is a non-story, and I doubt this department even pays for itself with all these “seizures”.

#63, #71 CBCNews? Serious? Their major news from abroad’s usually about Obama’s sneezing or POSSIBLE election of CANADIAN cardinal. It looks like people feel better finding something worse in others rather then solving their own problems. Kind of dragging attention FROM CANADIAN bubble.

#149 smartalox — “So my question is, if all this Chinese cash is entering the Vancouver economy, what will happen when it’s time to take the money out? If nobody buys, will these “investors” lose their investments?”

I think there will always be someone to buy, unless there’s a huge radioactive leak in Kitsilano. My feeling is that money launderers feel that their gain came when they stole/extorted/whatever the money in the first place, and if they lose 20% in the laundry, that’s the cost of getting it clean and/or keeping it safe.

I’m a first time poster and long time reader. So when will these darn home prices come down? I’m in Ottawa and looking to see what’s out there and prices just seem to keep creeping up.

I rent a one bedroom apt for $1K per month, everything included and it’s a nice building. I just went to look at a 2 bdrm, 2 bth condo for $350K. With the mortgage (20% down), property taxes, utilities and condo fees, this thing would cost me $2K per month to own. So what’s the point of moving out of my apartment? Not buying a place like this and rending I have an extra $1k each month for savings, investing and enjoying life.

Garth, I know you don’t hold a crystal ball, but when will these prices come down for it to actually make financial sense to buy a place?

You live in a nice building and save a grand a month by renting? Duh. — Garth

I’m looking at potentially buying some ZWU by BMO. Garth, any opinion on this fund? It seems to be a good value at this point trading somewhat below its last year average and the yield is pretty sweet. Any reason to stay away from this?

#167 David – in a down turn in Real Estate the City of Ottawa will take a huge hit which will be covered up, so forget what the press is saying, as rent for now and in time go to them directly to hoop a bargain to buy a bargain on their books, as they will give you a good deal that will be out of this world. The public will never know about this all, so tell nobody.

G…you’re saying that taxpayers backstopping cmhc mortgages…guaranteed unfunded pensions… tax breaks for unionized industries… are not a direct subsidy that comes out of the citizens pocket? Huh????……have another tequila bro !!

You’re sure firm in your support of the sputnik crowd…in that you’re as consistent as a broken clock.

I was at a ‘green’ bank last Friday and over heard a lady talking with a bank teller. It seems she was very frustrated that the bank wouldn’t renew her mortgage because she keep saying she was approved before and the bank teller keep saying that it’s because of the regulation change and sorry they can’t do it. The story then moves to LOC and other options such as try another bank but all seems not applying to her either.

I feel sorry about that lady because we are the same ethnic group and she sounds really worried. But I guess a lesson will be learned that the bank is really not your friend in some cases! Try harder reading all the details next time before your sign on the dotted line.

Sorry as screwed up that last post about Ottawa, as go to CMHC directly to hoop a bargain on their books, as they will have it all with inventory that one can make a great deal. Yep, in Ottawa, as have done this all before, so need I say more?

–1:51 clip There are TV ads for Cdn. beer, and also for Oz beer. This is one of the better Oz ones.
*
#106 Leo — “F warned again the banks of the risks of a race to the bottom :” — Better described as doublespeak. Most politicos toe the line and are not willing to be sacrificial lambs, so will say what is needed at the moment, while knowing that although sheeples do have memories, they don’t know what they are for.

#120 Dupchek — “Wake up! This is slavery in a new dimension at a new era.” — Slavery only if one is in debt to banxters, mtge. corps or the like which is why it is far better to rent for the present time, and build up TFSAs instead.

#144 Men Who Stare At Sheeple — “In the end, perhaps we are all the greater fools!” — Well said! An excellent post.

#147 Dr. Hoof-Hearted — “. . . around the time of NAFTA….many firms were already looking to move jobs overseas to places like China. The long and short of it is the Western Countries are purposely being hollowed out. China is simply being set up as a proxy, to replace the US. China is “under control”..and its not by the Red Chinese..oh they will go the way of Russia and shed Communism ?” — Good post and accurate. It’s the middle part, the part we are in now, which has to be sorted out one way or the other, before one can see the end game.

I think we discussed a while back that many pre-sale condo units have had the assignment flipped, perhaps several times. It was also noted that the profit from each assignment flip flies currently under the CRA radar screen …and that the author of this blog stated they, namely CRA, have the tools and the resources to pursue this matter IF THEY SO CHOSE.

I don’t see what is fair about putting some poor schmuck through the wringer with an audit and maybe grab a few thousand $$$ based on a simple error, but turn a blind eye to what has all the hallmarks of untaxed profits/money laundering.

Now, I am appealing my own assessment, and having seen the process skewed in favour of the property assessor, I think I will pull out my ace and say that if my assessment is not re-adjusted, I think that CRA and possibly the RCMP should investigate . One of the comparables they used is a home the previous owner tried to sell for years, was finally sold, and then re-listed by the new owners within (2) months for TWICE what they paid and has remained vacant.

“I’m looking at potentially buying some ZWU by BMO. ”
——————————————————————-
I bought ZWU for my parents account. If you are looking for just yield, then there is nothing wrong with it. Capital appreciation is better if you buy the individual holdings.

–Gone Viral Video showing wealth inequality in NAmerica; Dismantling Blueprint It helps to have a destructive govt. in and opposition running the show; Serfdom /downturn. Central banks mentioned here; UK Bedroom tax; NatWest The US govt. and state govts. have also quietly emptied people’s safety deposit boxes; US RE“The money-junkies keep homes off of the market to create an artificial shortage to drive housing prices up, to make more money on the financing. Were housing cheap enough where you could pay it off in just five years, you would be free of the bankers and they cannot have that. The goal of the bankers is for housing to cost so much you will spend a lifetime of servitude working to pay it off, finishing just when you die or are too old to be of any further use.” wrh.com.
*8:54 clip 15 year old invents earlyt detection for pancreatic cancer — cost is three cents; No Gun Sales China will be pleased about this, as they are the ones who want the Second Amendment scrapped, and Obomba pushing hard; 1:29:41 doc. Vaccine (and drug) nation; Drones Tracking gun owners and cell phone users; Ooohhh Kannaduhhh ACTA and the US.

Now this young girl from Beijing caught my eye as could speak perfect English; was very attractive; and the clothes she was wearing said it all, so asked her out for Dim Sum. She asked me if I was a wolf, and said trust nobody and she laughed, and she said ok. This was an opportunity of a lifetime, as spent all my time asking questions about China while the cart service came about with Dim Sum dishes.

a life time of opportunity for what? to find out whats going on in China by taking out a 20 something year old Beijing girl to Dimsum. Yes, you are old, but not wise.

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The views expressed are those of the author, Garth Turner, a Raymond James Financial Advisor, and not necessarily those of Raymond James Ltd. It is provided as a general source of information only and should not be considered to be personal investment advice or a solicitation to buy or sell securities. Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor's circumstances and risk tolerance before making any investment decision. The information contained in this blog was obtained from sources believed to be reliable, however, we cannot represent that it is accurate or complete. Raymond James Ltd. is a member of the Canadian Investor Protection Fund.